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Increasing International Competitiveness of Chinese Industries Xiuli Chao ( ) Department of Industrial Engineering and Interdisciplinary Operations Research.

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Presentation on theme: "Increasing International Competitiveness of Chinese Industries Xiuli Chao ( ) Department of Industrial Engineering and Interdisciplinary Operations Research."— Presentation transcript:

1 Increasing International Competitiveness of Chinese Industries Xiuli Chao ( ) Department of Industrial Engineering and Interdisciplinary Operations Research Programs, North Carolina State University Raleigh, NC 27513, USA

2 Chinese Industry Chinese industries have made tremendous progress since China opened its door to the world. Export steadily increasing. Chinas national economic competitiveness has been improved significantly over the past 25 years. What are the things that should be done to make Chinese industry stay competitive in the future world market?

3 Chinese Industrial Products Since early 1980s, we observed a steady increase of Made in China products in world market. Products range from shoes, toys, low-end clothing in 80s, to electronic, computer, etc. in the 90s and now. Majority of toys in world market are Made in China. Some people view China as the Manufacturing floor of the world. This is very much in parallel, e.g., to Japanese products in 1950s, and products of Taiwan, Hong Kong, etc. in 1960s and 1970s, in the US market.

4 Some Observations How do foreigners view Chinese products? Labor advantage (cheap labor). Most of the products, however, are designed overseas, and manufactured in China. This is not a healthy phenomenon if it stays for long. We all observed the transitions of manufacturing from Taiwan, Hong Kong, Southeast Asia, etc., to other parts of the world. Competition only based on lower labor cost will not put Chinese industry in a competitive position in long run.

5 Two Main Points : Competitiveness Through Innovation Research and science parks focusing on Research and Development : High quality products. Create a culture of Total Quality Management, and this cannot be achieved without government playing a key role.

6 Research & Science Parks Organizational entities that sell or lease spatially contiguous land and/or buildings to business or other organizations whose principal activities are basic and applied research or development of new products and services (Luger and Goldstein, 1991, page 5). This definition excludes Silicon Valley.

7 Research & Science Parks A science park is an organization managed by specialized professionals, whose main aim is to increase the wealth of its community by promoting the culture of innovation and the competitiveness of its associated business and knowledge based institutions – International Association of Science Parks (IASP).

8 A Historic Look First Industrial Park is the Central Manufacturing District in Chicago, 1905. First Research Park established in 1948 in Menlo Park, CA. The most renowned Research Parks were developed in the US in 1950s. Today there are over 150 Research Parks in North America, including 136 in the US.

9 US Research Parks In 1950s the most renowned research parks were developed. Stanford Industrial Park, in CA. 1953. Research Triangle Park, in NC. 1958 Waltham Industrial Center and other developments on Bostons Route 128, in MA. 1954. All research parks are affiliated with one or more major research universities.

10 Research Triangle Park (RTP) Developed in 1958 by leaders in business, universities, and government. Three research universities, constituting a Triangle– UNC at Chapel Hill, NCSU at Raleigh, and Duke at Durham, giving the name of the research park. 7000 acres of land, over one hundred major research organizations, employing more than 40,000 employees. It has had and is having a tremendous impact on the US economy in general, and North Carolina economy in particular.

11 Why RTP in NC NCs traditional industry is Tobacco, Textile, Furniture, etc. Leaders in NC realized the need to transform from agriculture and traditional industry to modern and high tech industries in early 1950s. Today, as we all know, traditional industries throughout the US are facing serious challenges. RTC has put NC in very competitive position in the modern economy.

12 Why Research Parks Stimulate regional economic development. Reindustrialization. Quickly get into high-growth industries. Creating synergies between firms and industries. Research parks have been portrayed as the catalyst for moving into the next generation of industry and helping a region establish itself within the emerging global economy.

13 Making Chinese Industry More Competitive For Chinese industry to stay competitive in the world economy in the next 20 years, China must continuously improve its industry through innovation. Developing research and science parks is a vehicle to reach this goal. Government should play a key role in helping industry by promoting innovation and funding applied research.

14 Innovation Is Not Sufficient Research and Science Parks only create prototype, not the product itself. For Chinese products to stay competitive in todays world market, one issue of uppermost importance is quality. As is well known, Japanese products stand out for its top quality. Japan did not get to that position without elaborative effort.

15 TQM in Japan In 1950s, Japanese products in US market were perceived by consumers as cheap stuff, and itsquality is not well regarded. As Japanese automobiles entered US market in the 60s, Americans did not believe it would be good product. However, as Americans gradually started to purchase Japanese automobiles, they found that it was very reliable. (Oil crisis in early 1970s also helped the Japanese.) But, how did they get there?

16 Its been a long way! Japanese economy was at its bottom after WWII. Realizing quality problems, they invited Dr. Edwards Deming in 1950 to lecture on statistical quality control to executives, managers, engineers, and researchers throughout the country. It had a tremendous impact! Deming prize was established to award companies who have achieved distinctive performance improvements through applications of TQM and individuals who have made significant contribution to the study of TQM.

17 Deming Prize in Japan Deming prize has become so esteemed in Japan that each year, much like Americas Academy Awards, millions of Japanese watch the Deming prize ceremony aired live on TV. This process developed a culture in the society to build high quality products – A worker would be ashamed to produce defects.

18 Competition on Quality Quality of Japanese products, and the reputation it developed, made it possible to spread world market. In mid 1980s, MIT made a 5-Million-Dollar 5 Year Study on quality of Japanese automobiles (The Machine That Changed The World, by Womack, et al). Public was made aware of quality issues more than ever before.

19 Malcolm Baldrige National Quality Award in USA In 1987, President Reagan passed the Malcolm Baldrige National Quality Improvement Act. Since 1988, Baldrige ward is given annually. Some observers refer the Baldrige award as Nobel Prize for Business. Today, the difference in quality become Japanese and US automobiles has been significantly shortened.

20 How to Achieve TQM in China? Quality has to become part of culture. It has to be emphasized by each and every level of an organization, by each and every level the private and public firms, but each and every level of the government. TQM is going to be crucial in improving Chinese industrys competitiveness in the future. Question: How to develop TQM culture in China?

21 Recommendations Establish national prestigious quality awards directly by top central government. Use every possible means (e.g., media, etc.) to maximize the public awareness of TQM and this award. Encourage and support the development of R&D focused Research and Science Parks. Increase international collaborations on these and other issues.


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